A Brand Is Born

Mike Hofman was previously editor of Inc.com and a deputy editor at Inc. magazine, which he joined in 1996. The site was nominated for a National Magazine Award for Digital Media in 2010, and was named the best business website by Folio Magazine. In 2006, Hofman was part of a team of writers nominated for a Webby Award for best business blog. He lives in New York City.

How did three guys turn their love of the beach into a brand worth hundreds of millions?

I've heard earfuls about Tommy. People love him. They all agree that he's smart. Virile. Debonair. They don't all agree on the details of his life, however. Some say he resides in the Bahamas, while others think he lives in Florida. Some suspect he used to work on Wall Street. And he has a small trust fund. Owns two vintage convertibles. Goes fishing daily. Travels a lot. What a life.

It's said that this tanned enigma has Jimmy Buffett's blood pressure and Gary Cooper's bearing. Such equanimity comes in handy. For a guy whose watchword is relax, Tommy's plate is full. His tastes and preferences are the basis of a lifestyle brand created by Viewpoint International Inc., a nine-year-old company with sales estimated at more than $300 million. Like Martha Stewart, Tommy oversees every choice made in his name, from distribution to product design to advertising.

The punch line (as perhaps you've guessed) is that Tommy is not a real person. He is a fictional character devised by three flesh-and-blood entrepreneurs to develop their brand -- the Tommy Bahama line of merchandise, which includes clothing, accessories, home furnishings, and more. The company's three founders debate "What would Tommy do?" whenever they consider a key business decision. Does he golf? Yes. Does he own an overcoat? No way. Does he own a tie? That last question provoked a feud, which only underlines the obsessiveness that has become the hallmark of this company. "One of the reasons we've been a success is that we know what came first," says cofounder Bob Emfield, 59, a grave Minnesotan with sharp features and silver hair. "This guy came first. He has a strong personality, and we cater to him."

Emfield's obsession is shared by his partners, Lucio Dalla Gasperina, 44, a bon vivant and designer who runs the Seattle office, and Tony Margolis, 59, Viewpoint's New York City-based president, who is the quiet power at the center of the Tommy empire. The three men have a combined experience of nearly a century in the apparel industry. They've seen brands rise and fall, sometimes so quickly that the whole cycle could be timed with a stopwatch. But despite their expertise, it's amazing they succeeded at all. "We spent our first two years going out of business," Dalla Gasperina jokes.

Though Viewpoint is now a smash success, its start-up was a botch, hampered by too many projects aimed at too broad a consumer base, an exorbitant payroll, and a miserable distribution strategy. And yet the business endured -- a testament to the steel of its founders and the strength of the brand they created. Along the way, they developed tactics that would well serve anyone growing a brand from infancy to adulthood. Tactics like choosing distribution channels for what those channels do for the brand, not what they do for short-term profits. Like never marking down prices. Upgrading quality to stay ahead of knockoffs. Insisting on employing homegrown merchandising methods. And -- in a bravura moment -- taking money they might have spent on advertising and instead spending it in an unexpected way.

Now that the hardest parts are over, the guys behind Tommy Bahama may be tempted to rest. That would be a mistake. As the scope of the Tommy Bahama product line surges like the sea at high tide (now sarongs, now lamps, now golf bags), the company is in danger of expanding carelessly, even as the partners proclaim that "brand is not about volume," as Margolis puts it. Already, they seem to be contemplating some extensions that sound utterly ridiculous. But even their craziest ideas can't be dismissed because of one simple fact: in just under a decade Viewpoint has created a brand that even the most accomplished entrepreneur would envy. Under the guidance of Tommy, of course.

For a management discipline that's written about a lot, branding is a pretty fuzzy concept. And giving birth is the stage of the process that's often ignored. Few of the recent books about branding detail the particular rigors of brand entrepreneurship; instead they focus on professional brand management. The distinction between the two is an important one. If you have a brand lying around the office and spend your time thinking about ways to build it out, then what you're engaging in is essentially science. But if you have to create a brand out of whole cloth -- well, that's more of an art. It takes a different mind-set. And time. Henry did not build Ford in a day, and Michael is still nurturing a brand called Dell some 17 years after founding that company.

In her recent book Brand New, Harvard Business School professor Nancy F. Koehn defines a brand broadly: it's the relationship between a company and its customers. That relationship encompasses everything a company says about itself and everything customers perceive to be true about the company. The relationship is hard to sustain and even harder to create. As the CEO of a start-up or small company, you face the toughest circumstances of any brand creator. You don't have cash. You don't have time. And you have a lot of other priorities. Unless an entrepreneur is disciplined, the process of brand creation gets ignored, Koehn says.

In the case of Tommy Bahama, the company's three principals didn't let a lack of time or money stand in their way. They were dogmatic when it came to building their brand, focusing relentlessly on every signal they sent to the market. And they were rewarded. That's because if a start-up builds a good brand, it can grow very quickly. Witness Tommy Bahama, which has grown from $3 million in revenues to more than $300 million in seven years.

But what appears now as a textbook example of how to build a brand began as a lark. In the 1980s, Emfield and Margolis and their wives bought neighboring beach homes on Florida's Gulf Coast. The two men had met in 1969, when they worked for blue-jean maker Brittania Ltd. Over the years, as their vacations drew to an end, the couples joked that they never wanted to leave the beach. They wanted a trust fund. An island home. To fish all day and walk all night under the stars.

Those musings became a game of invention. The two couples created a character named Tommy Bahama -- the man for whom life is one long weekend -- and began to tell stories about him. On beach blankets or walking along the shore, they painted for themselves a portrait of Tommy: where he lived, what he did, what he owned. Unwittingly, what they were doing was creating a story that, because it was at once complex and focused, could easily become a brand. And for Emfield and Margolis, who had at least one more apparel industry escapade in them, the Tommy Bahama story did become a brand -- as soon as they posed the question "What would Tommy wear?" "The four of us kept adding to the story, and that became the springboard for a sportswear company," says Emfield.

In 1991, Emfield and Margolis took concrete steps to give their fantasy legs -- and, of course, pants. They approached Dalla Gasperina to be their partner and design guru and obtained a commitment from a Hong Kong factory for financial and manufacturing support. The three partners and the factory pooled just under $2 million for start-up capital. They were clear on what they would produce: Tommy liked silk. Tommy liked comfortable shorts and print shirts. But Tommy also liked tailored pants. And he liked his clothes to be durable because they were exposed to the elements of the islands. What came into focus was a line of elegant tropical clothing for men aged 35 to 65 with discriminating tastes, bearing the brand name Tommy Bahama.

For three guys who isolated the DNA of an excellent brand in short order, the company they founded was a mess right from the start. One of the most obvious problems was that the three founders put themselves on a pay scale that was lavish by the standards of fledgling companies. "We were all coming out of six-figure-salary jobs," Margolis offers by way of explanation.

There were other structural problems. One of the earliest decisions they made was that Tommy would not carry the company on his own. The partners invested their capital to launch not one but three apparel lines in three segments of the market that, Margolis says, they felt were opportune at the time. The two other labels: Gear for Urban Training, a teen-skateboarder line, and Linguini & Bob, for the lady-killer "Vinnie Barbarino group," Margolis says. They premiered the trio of brands in the spring of 1993 and breezily assumed they'd turn a profit in a year.

From the start, distribution plans for all three brands faltered. For Gear and Linguini & Bob the problem was simple. Viewpoint had agreed to sell both brands through Merry-Go-Round Enterprises Inc., a midsize retail chain based in Maryland that operated stores called Merry-Go-Round and Chess King. The chain leased a lot of mall real estate, but it was entering a period of decline that would end in bankruptcy.

Tommy Bahama's initial distribution strategy was also flawed. The company had intended to sell Tommy Bahama to large department stores -- perhaps an unrealistic plan, given that big retailers have never treated young companies warmly. In the early 1990s it was even harder for a boutique brand like Tommy Bahama to get any attention. At the time, department stores were centralizing purchasing, reducing their number of buyers, and requiring wholesalers to travel to their offices for sales calls, rather than sending store representatives to wholesalers' showrooms to be pitched. The message those changes made was unmistakable to small fry like Viewpoint. "If it wasn't red-white-and-blue Hilfiger, Polo, or Nautica, they didn't want it," Emfield recalls.

SITTING PRETTY: "Tommy has a strong personality, and we cater to him," says Bob Emfield.

In desperation, Emfield began showing Tommy Bahama apparel to the owners of specialty stores. A smattering of those businesses were intrigued. One of the first chains to pick up the brand was Gary's Island, a small chain on the West Coast and Hawaii. Encouraged, Viewpoint began marketing Tommy Bahama to small shops that sold men's clothing, with Margolis, Emfield and two of their younger relatives (who already worked for Viewpoint) traversing the country to visit specialty stores. The shift in strategy was expensive -- at least, in the short term. The company had to spend more to get relatively small orders. And once Viewpoint got a store's business, it had to worry about getting paid. "We were fearful that the specialty stores wouldn't pay their bills or that they wouldn't have the credit to buy enough to make a big business," Margolis recalls. As it turned out, their fears were rational. "Even now, I'm not going to tell you that the credit community is going to aggressively allow a small store to build a business with me quickly," Margolis says. "But as things unfold, our clients' credit lines have grown."

And in the long term, the high cost of selling to specialty stores has been offset by the benefits to the brand. As Koehn says, "A brand is not only about what you buy but from whom you buy it." If a clerk at your favorite men's shop tells you about a great pair of silk pants, it's more meaningful than a similar tip from an anonymous department-store employee, since you trust someone you know not to steer you wrong. Then it's up to the pants to fit well. If they do, suddenly Tommy Bahama means something to you. "As that trust grows," Koehn adds, "a company can introduce a range of new products more easily and cheaply." That's the power of the brand.

By the fall of 1994, Tommy had the trust of a core constituency of specialty retailers and their customers, which is another way of saying that the company truly had a brand, albeit an embryonic one. But one thing stood in Viewpoint's way as it sought to unleash the power of its brand: the company's bank balance. The partners had burned through their original $2 million. To continue, they'd have to risk more money. After some deliberation, the three men came up with a strategy. First they decided to drop the Gear and Linguini & Bob lines. Then they agreed to reduce their salaries and invest more of their savings to keep Tommy Bahama alive. Finally, they decided to launch a new private-label division -- an odd choice for a company that was building a brand. "We did it to pay the light bill and the phone bill," says Dalla Gasperina. Margolis goes even further. He calls the decision "the one key thing that happened in our history."

The private-label work wasn't glamorous -- manufacturing plain cotton twill khakis for one 400-store chain, for example. But private labeling allowed Viewpoint to say yes to business that Tommy would have turned down -- that is, it helped them take their embryonic brand and nurture it without skimping on quality or taking orders from down-market retailers. That is the process of building brand integrity. Once a company has created a relationship with customers -- a brand -- it can either build on that relationship or trade on it for a quick buck. "What happens to most people at that point is that they take every order they can get," Margolis says. "They do things inconsistent with the brand."

Private-label work had helped Viewpoint pass the break-even mark by the end of 1994. Flush for the first time, the company was finally in a position to advertise. Emfield pegs the number it had to spend at that time at roughly $2 million. But the partners needed to figure out how to spend it. Magazine rate cards made them blanch, and the cost for TV time was even more unnerving. The more they weighed their options, the more Margolis, Emfield, and Dalla Gasperina worried that they would spend a lot of money on ads and get nothing in return. Assessing the options, they did exactly what nobody would have guessed they would do: they decided to open a restaurant. It was a wildly dangerous decision. Reckless. And, as it turned out, a choice that perfectly suited Tommy. "It's the greatest advertising vehicle ever, and we made money doing it," says Margolis.

The restaurant scheme came about by accident -- "blind luck," Margolis says today. Initially, the company zeroed in on opening a retail store, not as an end in itself but as a way to promote its wholesale business. The partners had been unhappy with the way most stores were displaying Tommy clothing. "People would buy our product and then display it on a sterile steel-and-glass shelf," says Margolis. Viewpoint advocated using painted-wood or rattan display cases and hanging the shirts face out, rather than hanging them sideways, as in a closet. A company-owned retail store could serve as a model home that Viewpoint's wholesale customers could visit. The partners figured they could put wholesalers in touch with the same supplier that provided their retail store with nice display cases.

DISPLAY OF AFFECTION: Tony Margolis has pushed retailers to display Tommy clothes in a way that Tommy himself would applaud.

Not far from the Margolis and Emfield vacation homes, the partners found vacant commercial space in Naples, Fla., a gulf-side resort known for splendid golf courses. "When we pitched the landlord, she was so enthusiastic, she asked us what we would do if she made additional space available at a very good deal," Margolis recalls. "What would Tommy do?" the partners pondered. He might go to a juice bar. No, they decided, he would prefer a microbrew beer. And maybe a nice meal. Tommy's kind of restaurant was easy for everyone to imagine. "Steel drums, full moon, palms wafting in the breeze," Emfield says. "If you serve them a meal when they're on vacation, you've got them forever."

A retail store opened in November 1995, and an attached restaurant unveiled its tropical menu and white tablecloths three months later. The cost of the build-out was $1.2 million. Sales for the retail store alone were $2 million in that first year and have since grown to $7.2 million. While diners wait for their tables, they browse. Clothing sales stay strong as late as 11 p.m. "It's very casual but with a fun ambience," says Gabrielle O'Boyle, who works at the Ritz-Carlton Naples. "We send our guests there."

As much as the store introduced Tommy to the diners of Naples, it also introduced potential customers to Tommy, helping Viewpoint better understand which people were buying the brand and what they wanted from it. After cashiers at the Naples store noticed women buying extra-small men's shirts, Viewpoint ramped up a Tommy women's line. The company also reduced the use of cotton in favor of silk, since silk items sold briskly. In the past five years the company has opened 12 retail stores and 5 more restaurant-and-retail-store "compounds."

W.C. Wells, who heads the Tommy Bahama retail division, claims that sales range from $2.5 million to more than $7 million per store per year -- from $700 per square foot in Chicago, the chain's stinker, to $2,000 per square foot in Naples, the chain's star. He further claims that the operating profit per store ranges from 5% to 20%.

And consider those figures in light of the following: the stores never, ever mark down their inventory. All the company's retail stores are required to return unsold inventory to the wholesale division. Why? If Tommy retail stores marked down their merchandise, they could find themselves pricing goods lower than mom-and-pop stores that carry the line. And since mom-and-pops make up more than half of Tommy's sales, Viewpoint doesn't want to upset them.

The Naples compound's success jump-started the entire wholesale division. "Retailers that were selling us in 4 or 5 stores in a chain suddenly wanted us in 20. They wanted more depth in terms of how many products they sold, and they wanted us to build fixtures for them," Emfield says.

The opening of the first compound marked the beginning of the golden age of Tommy Bahama. The company doubled its annual sales for several years in a row, driven by the expansion of the wholesale business, the growth of company-owned retail, and a surge in licensing deals. Licensing revenues for apparel accessories like shoes, handbags, and ties now top $16 million a year, and the company has recently signed deals for eyewear and sunglasses, lamps, and rugs. For Viewpoint "that's pure profit because the royalties I pay them flow right to their bottom line," says Donna Dixon, president of Paradise Bag Co., based in Millburn, N.J., which manufactures Tommy handbags and luggage.

The gorilla of all Tommy licensees is Lexington Home Brands, a North Carolina company that signed on with Viewpoint in 1999. In only a year and a half on the market, Lexington reports its Tommy Bahama furnishings have brought in more than $100 million in sales. But the Viewpoint guys haven't let Lexington president Bob Stec get to nine digits in sales the easy way. "The integrity of the brand positioning is paramount to them," Stec says. "If they saw a design that didn't fit Tommy's lifestyle, even if they thought it would do volume, they didn't do it. From an upholstery standpoint, they had a very clear view of what the fabrics should look and feel like. To them, the definition of the brand was so clear."

Given that Tommy's founders live in three far-flung cities, I made arrangements to meet them when they would all be together. The occasion: Magic Marketplace, an apparel-industry trade show in Las Vegas that spread out over 2 million square feet. At Magic exhibitors that have brands both big (Kenneth Cole) and small (ManSilk underwear) proclaimed the superiority of their wares.

Yet even here Tommy stood out. The company's booth -- a two-story stucco island home with pastel shutters, weathered floor tiles, and a veranda with painted railings -- evoked the Danish architecture of St. Thomas. It was decorated with vintage luggage and barrels of bananas and coconuts and pictures of sailboats. Fans whirred below the tin ceilings.

An air of triumph hung over the festive bungalow. The partners had recently sold a minority stake to Saunders Karp & Megrue, a private-equity firm based in Stamford, Conn., for more than five times earnings, with the company remaining under its founders' management. It's ironic that a brand born out of a beach-house fantasy of abandoning the rat race has served only to pleasantly complicate the lives of Margolis, Emfield, and Dalla Gasperina. Indeed, the three entrepreneurs have big plans on the drawing board. They picture a Tommy Bahama hotel and golf resort. Emfield gets giddy when he envisions the lobby, complete with a Tommy swimwear shop and a Tommy golf shop and another with more formal clothing and a couple of Tommy restaurants. (The partners announced at one point this year that they had found a location in Fort Lauderdale, but those plans fell through.)

The guys also dream in grandiose fashion about opening a Tommy Bahama marina and filling it with boats bearing the Tommy Bahama signature. And a parking lot filled with SUVs bearing the same name, like the Coach Lexus and Eddie Bauer Ford Expedition that were popular a few years ago. Among more practical plans: international sales. Also, last spring the company began spending significantly on national magazine advertising. Tommy ads feature a handsome, silver-haired male model from northern California, who was chosen after a national casting call. He is now the face of Tommy Bahama, the literal embodiment of the brand. The ads have run in upscale, vacation-friendly magazines like Vanity Fair, Yachting, Travel & Leisure Golf, Esquire, and Town & Country. What's more, the company is investing $2 million in sports sponsorships. In the past two years, Tommy Bahama has backed a Trans-Am race car, a two-man sailing team, and a high-speed catamaran. (The perks of sponsorship are evident: Tommy executives get to hang out at the races.)

Blue jeans are also coming to the Tommy party. Adjacent to the Tommy booth at Magic was another booth, distinctive yet Tommylike. Indigo Palms by Tommy Bahama, the signs read. Indigo Palms is the first new brand that the Viewpoint founders have created in seven years, though it isn't as much a risky new entity as it is a Tommy Bahama spin-off. "This is something I've been pushing for for years," Emfield says. "Most of the woven stuff in my closet is from Tommy: the solid tops, the T-shirts, and the woven bottoms, which are the best in the world. But all of my jeans are from other manufacturers. So the next thing to do is own the jeans space in my closet."

Starting Indigo Palms may help the partners recapture the energy of the art of branding, making the repetitious activities of the science of brand management easier to bear. Not that the management component isn't more crucial than ever. "The biggest temptation for people who have created a brand is to think that they've already gotten everything right," says Koehn. "These guys have to hire the right stewards for the brand and also build an organizational structure that is as disciplined as they are as leaders."

Koehn adds that this is the moment at which truly great branding companies ramp up their efforts to learn what their customers think and feel about the brand. With more stores, more advertising, and more awareness, Tommy the brand has become tangible. Many people think they know who Tommy is. At the same time, customers' needs change. The challenge for Margolis, Emfield, and Dalla Gasperina is to stay true to Tommy but also continue to offer customers something they want. It's a tricky balance. But the partners recognize that their brand will evolve. "The Tommy of 2002 is different from the Tommy of 1992," Emfield says. "He's aging just like us."

PRODUCT DESIGN: "A brand cannot exist without a good product or service," brand expert Nancy Koehn says. To that end, Tommy designers spend less time devising cool tropical patterns for their clothes and more time on the feel of the fabric, the silhouette, and details like buttons and zippers. Today solid-color garments make up 70% of the Tommy high-quality-apparel business, thwarting knockoff artists who tried to ape Tommy by designing cheap cotton Hawaiian shirts.

ICONOGRAPHY: A sailfish, the word relax, a jazzy palm tree. To underscore the many facets of the brand, Tommy designers employ many different logos rather than a ubiquitous image like Nike's swoosh.

DISTRIBUTION: The more exclusive, the better. And don't let multistore chains put your products in every venue, the Tommy philosophy goes. If only 2 of 50 stores are genuinely up to snuff, then stick with them.

MERCHANDISING: A wide variety of products displayed together provides shoppers with more information about your brand. But make sure the products are arranged neatly and are well maintained. For example, late in the evening at the Tommy shop in Las Vegas, a store clerk could be found busily steaming the wrinkles out of all of the silk shirts on the retail floor.

LICENSING: Tommy executives monitor the company's licensees carefully. New product designs are reviewed in the New York City office. And licensees regularly attend meetings with the company's licensing director.

ADVERTISING: Print ads are expensive, so don't buy them just for the hell of it. Tommy marketers use ads to build on the brand. This past fall's campaign ads feature "winter beach walk" apparel and are tailored to boost sales in Tommy's off-season. The advertising includes women's clothing to underscore that, yes, Tommy makes clothes for women, too. And the ad's use of understated earth tones plants the notion that Tommy is more than just loose-fitting shirts emblazoned with hibiscus and fruity cocktails.